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How to restore your credit: Our expert advice

How can you re-establish credit after a bankruptcy or consumer proposal?

Debt problems can happen to anyone: the neighbour, you or me. And when the mountain of debt becomes insurmountable, we may find ourselves faced with the choice to either make a consumer proposal and negotiate with creditors to repay the debts as much as possible, or declare bankruptcy.

Regardless of which option you choose, you will have to try to improve your credit afterwards. But how do you go about increasing your credit rating after either of these events?

In this article, our team shows you how to rebuild your credit following a bankruptcy or consumer proposal. Then, we’ll look at how a private mortgage product can help you get cash when traditional banks and financial institutions turn their backs on you while you are rebuilding your credit.

How to boost your credit rating after a bankruptcy or consumer proposal

You probably already know this but declaring bankruptcy negatively impacts your credit report. In fact, going bankrupt lowers your credit score. A first bankruptcy will stay on your credit report for 6 years with Equifax and 7 years with TransUnion. A second bankruptcy will remain on file for 14 years. That’s a long time, a very long time.

However, it’s always possible to restore your credit after a bankruptcy or consumer proposal. Here are some recommendations to help improve your credit rating:

Open a savings account and make regular deposits

Opening a savings account and regularly depositing money in it helps you look good to financial institutions. In addition to helping rebuild credit following a bankruptcy or consumer proposal, this money in the bank will also be useful when applying for a new loan.

Apply for a secured credit card

A secured credit card requires a security deposit. Why? The deposit is used to protect the lender if ever the cardholder can no longer repay the balance on their card. The deposit amount is typically 1 to 2 times the credit card limit.

A word of advice: only take out one credit card and pay off the balance in full every month to help increase your credit rating. Plus, keep your credit card usage below 30%. And, finally, pay all your other bills on time too (electricity, mobile phone, internet, etc.).

Request a copy of your credit report

A credit report can contain errors, which could give lenders a bad impression. Getting a copy of your credit report, regardless of your financial situation, is a good way to make sure the information it contains is up to date.

Talk to your banker or personal finance advisor

Talking to your banker or a personal finance advisor can sometimes be very helpful in finding ways to improve your credit following a bankruptcy or consumer proposal. We invite you to contact your banker to find out more about the actions you could take to restore your credit. Or, contact us: our team will be very happy to answer your questions.

Obtaining additional funds with a mortgage when you have bad credit

Borrowers with bad credit have fewer mortgage options, because personal bankruptcies and consumer proposals make banks and traditional financial institutions cautious.

A bad credit rating is one of the 6 most common reasons for being rejected for a traditional mortgage.

Banks and traditional financial institutions place high demands on people who are rebuilding their credit. Notably, before granting you a loan, they will require that your credit report be up to date, compliant and free of errors. In addition, they will ask that you have been released from your bankruptcy or consumer proposal for at least 18 months and that there have been no negative entries during your recovery period.

These requirements and the many others that go with them are obviously not easy to meet for someone who is currently in or coming out of a financial bind.

So, how do you get a loan after a bankruptcy or consumer proposal? With a mortgage for bad credit, available from private lenders.

This mortgage loan is intended for people with a bad credit history: buyers who do not have the capacity to meet the demands of banks and traditional financial institutions.

The advantage of private lenders is that they usually have more flexible eligibility criteria. To qualify for this mortgage product when you have bad credit, you first must own a single-family home condominium, or a commercial or income building located in an urban and serviced area. Second, the sum of the current mortgage and that of the second mortgage must be less than or equal to 75% of the value of your property.

That’s it!

Applying for a mortgage with bad credit is also really quick and easy. You might even receive same-day approval once the online application form is completed and submitted.

Restoring your credit with a mortgage when you have bad credit

No one is immune to financial hardship. Declaring bankruptcy or having to make a consumer proposal can happen to anyone. But, even though these 2 avenues leave a mark on your credit file, it is always possible to rebuild your credit.

In the meantime, the mortgage for bad credit situations offered by private lenders will help you quickly obtain additional funds by using the net equity available on your property, without affecting your overall finances.

To learn more about this financial product, visit the Victoria Financial website.

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